A majority of the Illinois Commerce Commission removed from the table a proposal that would have given nearly $60 million a year in rate reductions to phone customers in return for the ICC's approval of the merger.

ICC Chairman Richard Mathias said the five commissioners will vote next week on a final merger approval order, and he has been working to build a consensus for the language. Dropping the main benefit to phone customers raises the likelihood there will be at least one dissenting vote. Commissioner Ruth Kretschmer has said that without a clear benefit to consumers in a well-defined rate cut, she will likely vote against approval.

The ICC's reversed course at the end of a month of deliberations angered consumer advocates who have argued that SBC will use Illinois phone customers as a cash cow to finance its forays into new service areas.

"What this means," said Martin Cohen, executive director of the Citizens Utility Board, "is that Ameritech shareholders get billions in stock price premiums, Ameritech executives get millions in golden parachute bonuses and Ameritech customers get nothing at all from this merger."

Besides getting the nod in Illinois, the deal also needs a green light from the Federal Communications Commission, which is expected to act soon.

Mathias has been trying to lead the other four ICC members through a thicket of proposals that will result in a 300-page approval order setting out requirements intended to promote local phone competition in Illinois.

Consumer advocates had argued that combining corporate offices, legal departments and other functions now operated separately by Chicago-based Ameritech and San Antonio-based SBC will generate hundreds of millions of dollars a year in savings that ought to be passed along to Illinois customers in the form of lower phone bills.

Commissioner Kretschmer and Mathias had advocated setting an estimated amount of savings and using it to lower phone bills as soon as the merger is concluded. But their one-time ally, Terry Harvill, joined two other ICC members--Richard Kolhauser and Edward Hurley--in rejecting that approach.

Instead of relying on an estimate, Kolhauser, Hurley and Harvill voted to direct the ICC staff to monitor the local phone operation in Illinois after the merger closes to determine actual savings, and then distribute half that amount to ratepayers.

Kretschmer and Mathias argued it would be nearly impossible to measure exact savings when it is in the interest of the merged phone company's accountants to keep the amount as low as possible.

"We'll see no reductions in rates, nor any money returned to ratepayers," Kretschmer predicted. "But I know how to count to three," which is the majority of votes on the ICC.

Kretschmer had proposed distributing nearly $60 million a year to ratepayers over the next five years as the price of merger approval. Even that amount was only about 15 percent of what consumer advocates said should be distributed.

The merger, valued at $60 billion when it was announced in May 1998, included a $13 billion premium to Ameritech stockholders.

CUB's Cohen said ICC members have done a conscientious job in trying to fashion conditions that will force the merged company to open Ameritech's local phone network in Illinois to competitors.

"In the long term, competition will benefit phone customers," Cohen said. "But in the short run, it won't. And the average small-time telephone customer shouldn't expect to see any rate reductions caused by competition."

Kretschmer, a vocal Ameritech critic, said repeatedly she wouldn't vote to approve the deal without a guarantee that ratepayers would get a clear benefit in the form of lower monthly phone bills.

Harvill, another Ameritech critic, suggested Friday that he is unhappy with parts of the proposed merger approval order that assert the takeover doesn't harm competition in Illinois.

Harvill and the ICC staff have argued that SBC was poised to enter the Chicago phone market as a competitor to Ameritech, but decided instead to buy Ameritech. The fundamental purpose of the merger, then, is to avoid competing with Ameritech for Chicago customers, according to this view.

By rejecting that analysis, Harvill said, the proposed language to approve the merger could open the way for future takeovers that shrink the pool of potential local phone competitors even more.

"This sets the bar so high," Harvill said, "that it's hard to think of a case the commission could find that does harm competition."

Although Harvill stopped short of implying he may vote against the merger altogether, he suggested he may issue a separate opinion from the one being prepared for a majority vote.